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tv   Bloomberg Markets  Bloomberg  September 1, 2015 2:00pm-3:01pm EDT

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is canada on the brink of a recession? technically, they already are. plunging oil prices. mark: red ipo's. why 70% of ipo's in the last year have been money-losing firms. good day from bloomberg world headquarters in new york and i'm mark crumpton, here with scarlet fu. september traditionally has not been a kind month, but this is getting a little ahead of itself. scarlet: falling right in line with that trend. lots of red across the screen for u.s. stocks. doesy 10 industry groups look at the 10 industry groups and s&p of never come all down.
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points has swung 400 from peak to trough. it is not limited to the u.s. take a look at the global equity selloff. the first arrow is when japan opened for trading, shortly after a right around the time we heard chinese pmi fell to a three-year low, signaling the slowdown -- the second arrow is when european markets opened for trading. the last arrow is when u.s. markets opened at 9:30 a.m. the selloff continues, circling around the globe. the surprised that there is a rush to safety. rice's upcoming yields down. -- prices up, yields down. the two year yield at 72 basis points. in currencies, stronger euro,
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stronger yen. the dollar is down as traders are betting that the fed doesn't have the ambition it needs to move in september with a rate increase. oil backing off. remember you star rally? -- remember yesterday's monster rally? nymex crude is back down 6.5% right now. mark: let's take a look at the top stories we are following at this hour. chrysler has kept its winning streak alive. 1.7% in analysts had predicted they would fall. chrysler sales have gone up for 65 consecutive months. ford also surprised by increasing sales. they were up 5.6%. trucks and suvs led the way while the car sales fell. gm motor sales fell.
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posted smallerta than estimated declines. scarlet: american factories have not expended the slowly in more than two years. slowly and more than two years. manufacturers are getting hit by the slump in china and other emerging markets. the stronger dollar making it tougher for u.s. companies to sell overseas. wants tota airlines itsits record in competitors faces. it will offer travel credits to accounts at the airline. behind -- only alaska and hawaiian airlines do better. scarlet: a showdown is looming over whether bank of america ceo can keep his chairman title.
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bank shareholders will get a chance to vote on whether the lenders board should allow him to add the chairman title last year. they say the bank has underperformed under his leadership. one bank analyst says bank of america should change the makeup of its governance committee or dump moynahan. >> the ceo got promoted to chairman after a board here -- bad year. the ceo got promoted to chairman without the board talking to shareholders even of the shareholders voted in a binding boat to separate the posts. vote.nding this will process makes a mockery of all the efforts of the industry to try to improve the reputation. scarlet: the two pension funds manage $476 billion combined, including a total of $1 billion
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of bank of america shares. that meeting is scheduled for symptom or 22nd. mark: shares of dollar tree taking a hit. the second-largest dollar store is trying to absorb the family dollar chain which it acquired in july. the major competitors dollar general. scarlet: the county clerk testified the supreme court over same-sex marriages in kentucky. kim davis refusing to issue licenses for same sex marriages despite a ruling by the high court last night. she says she is under god's authority. the district judge cannot hold her in contempt. they been called to a federal court hearing on thursday. mark: donald trump has inspired everything from internet means to impressive showings at likely voter polls. . piñata made in mexico they have become wildly popular in california. the have become a hot commodity
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as local scour the city to track .own their own trump piñata that is not a compliment. scarlet: that was made in mexico. mark: september is already off to a rough start with local markets getting hit hard again on week this coming out of china. scarlet: emerging markets getting pummeled, keeping currency risk on the table. how much further can emerging-market currencies decline? now with more.s it started off as china's yuan revaluation -- devaluation surprise anyone. that is now done. china has beenent: intervening to steam the currency fall, contracting the devaluation. brazilianhy does the real continue to tumble?
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posted a budget yesterday that was counter to what people were expecting. there were hopes there would be a surplus for 2016. they are admitting to a potential deficit. thattraders speculating could lead to a potential downgrade. mark: talk to us about the degree of the beating these currencies are taking. vincent: brazil is 38% this year. globalization has created this one dynamic economy. there is a marginal return on how much you can sell them how much you can consume without increasing wages. without increased income, you can only sell so much. about the currency markets when it comes to the major pairs. yuan, ther, the
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euro. people are flooding into the euro and the yen. those countries are committed to keeping interest rates low. the need that week currency to boost their economy. why has the euro been the safe haven? vincent: it is counterintuitive. flows you have seen, long-term place that the euro would fall . you are seeing this cross asset flow. that is the real reason the euro is up. i find it difficult to believe it is a safe haven status. ofs is just a reversal trading. it is the unwinding of a very crowded trade. vincent: especially the end. -- the yen.
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the dollar-yen is 50%. five yento come off and a correction is hardly anything in the bigger scheme of things. mark: what is the most surprising aspect? since the yuan was devalued until now. vincent: that it has taken so long for people to catch up to the straight. oil has fallen to $30 last week. that lack of demand was sparked by the second largest economy in the world. is slowingat china has not come to a surprise to anyone. mark: global markets seem to have taken it as a surprise. betty and i were speaking to a couple guests before. , has thise question been overblown?
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have the markets been overreacting? vincent: i think it's an overreaction in the sense that it's happening all at once. it should have been happening more gradually. china has over 3 trillion in reserves. they have not pledged against other liabilities. china has the ability to defend its currency. this should be taken with a grain of salt. support of china can this type of move. scarlet: it has the firepower to do so. talk about liquidity. there is a liquidity crisis or lack of liquidity in fixed income. vincent: it is terrible. terrible is an understatement. banks are no longer left to hold positions. because no one has realized how
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much the banks provided, that -- theyay the movements are very quick, very sharp. it is really difficult to manage growth. that is this a suggestion some people did not see this coming? vincent: there was this believe that hedge funds and high-frequency traders would replace that liquidity. that is not the case. scarlet: we will see if that changes in the coming weeks and months. thank you so much. 's currencyews is currenc specialist. mark: is canada on the brink of a recession? their economy shrank again in the second quarter amid plunging oil prices. that discussion is next. ♪
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mark: [bloomberg market day. scarlet: stocks losing height, falling back to the lows of the session. a quick update on where things stand. matt: things stand firmly in the red to kick up the month of september after an awful month of august. if you were along the market does long equities in august, thehad the worst august -- worst month in five years. depending on which index you were invested in. right now, seeing session lows for the dow jones industrial average. s&p down 2.5% right now. there are a couple of exceptions
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or stocks that swing between gains and losses today. american airlines and delta. we have seen them in the green, firmly in the green right now. american up 1.6%. delta gaining .3%. reason they are up is because deutsche bank has upgraded both of these -- the reason they have upgraded these, oil or fuel is one of the airline's biggest costs along with personnel. it is very expensive. even though you see a drop in oil a 5% right now, if you back away and look at what has happened over the past week, oil has firmed it's putting a little bit. a little bit. it was down at $38 last week.
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it's a lot cheaper for these airlines to buy. they do hedge a lot of their fuel needs. it makes it easier for them to deal with the cost to operate. speaking of oil at chesapeake come interesting stock today. we were thinking, why is chesapeake gaining? one of the few gainers in this market, especially as energy stocks coil stocks come anything related to energy has been down, down, down big today. chesapeake is up 2.5%. about 207 sing million shares -- it seeing to it is seven million shares -- 207 million shares being shorted. that's about 7% of the total flow. people are covering shorts, maybe that's why you are seeing
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the buying. netflix got a price target upgrade from bank of america. 9% right now.down bank of america said they will open up in japan, they are expanding globally. by the and of 2016, netflix wants to be worldwide. apple is now getting in on the game and they are in talks with television and movie producers to create their own independent content, the kind of thing that boost the netflix to these sites and has helped out amazon's prime service as well. when apple gets into your industry come everyone is afraid they will eat your lunch. markets,al malaise at it is down 420 points. scarlet: you wanted to know how to thicken up your lines. click on the line itself. right now, it is thin.
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click on it, it is thicker. matt: thank you very much, scarlet. scarlet: bloomberg terminal lessons right on set. mark: amazon is raising the stakes on competitors in the streaming video market. the e-commerce triton will let members of its $99 prime loyalty program download some tv shows streaming on its video service to watch off-line or when there is no internet connection. in order to watch content like down to not be, users can download the app for iowa's or android. -- ios or android. uber to hilton hailing help guests reach their
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destinations. they will be able to set up automatic notifications to request uber rides to and from the chains worldwide. mark: test love may be on track to start deliveries of its model x suv next month. -- tesla may be on track. customizingn start the cars. for $132,000retail . buyers will be able to customize cars by the end of august. that means deliveries could start by the end of september. canada is feeling the pinch of the oil shock. the country's economy shrunk again in the second quarter as businesses continue to scale back investments amid plunging oil prices. declined from april to june, but the consecutive gdp declines are smaller than any back-to-back contractions since
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1981. raising doubts that canada actually fell into an outright recession. i want to bring in greg quinn for more. isn't it that the technical definition of a recession is two quarters of falling gdp or shrink and growth? -- shrinking growth? greg: there is one difference between canada and the u.s. we don't have the history -- the main definition is the technical one. two or more quarters of falling gdp. on that measure, we do have one. there is another team of economists who look at a broader array of things such as the job markets, inflation. over those suggest the economy is not in a recession. , twoloyment is below 7% points lower after the last recession.
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inflation stripping out energies above 2%, suggesting things are not that bad. mark: has there been much damage to canada outside of the energy sector? greg: most of the damage has come into alberta. outside of that, we still have concerns around the housing bubble. i mentioned the job growth is there. where does growth come from now? it has not been a good year for our manufacturers. the broader economy has not been damaged, but there's is not a lot of momentum to suggested could recover. scarlet: what does this mean for the prime minister? we have 40 days to go before the election on october 19. bad economic news cannot be good for him. even if you call the
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campaign early, he was in a three-way rice. it's been tough going for him already. -- three-way race. fromys canada is different countries like greece and china. explain toder to voters when headlights of recession dominate the papers. of recession dominate the papers. he said the economy is back on track. scarlet: canada reports gdp on a monthly basis as well. greg quinn, think you so much. -- thank you so much. men.g up, move over, more women have taken the wheel as truckers. ♪
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scarlet: let's take a quick break from the markets and look at something in the labor markets that is changing. the u.s. is facing a shortage of truck drivers women are taking up the slack. and almost 1% increase since 2010. mark: they are better at the job than their male counterparts. comemeasuring accidents inspections and compliance issues, female drivers are outperforming males. thomas black did a great story about this. it is on this is a fascinating read. scarlet: women are a large untapped labor pool when it comes to trucking positions.
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we are more patient and cautious and attentive behind the wheel. mark: the american trucking association, women accounted for 5.8% of the 3.4 million truck drivers last year compared with 4.6% in 2010. scarlet: what kind of have come upe around it to make this more possible? cleaner terminals, schedules that guarantee home time, save for truck stops and power steering because there is no way a move that truck by myself. -- i could move that truck by myself. we have much more market coverage coming up right after this. ♪
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scarlet: u.s. stocks are just
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off their worst levels of the session, we have come off our lows, but still looking at a slight of 2.5% for the major indexes. in unprecedented announcement calling onrancis, all priests to parted women who have had abortions if they seek forgiveness. the change only applies to the traditional time for remission and forgiveness. we've heard a lot about market volatility lately. how are the world's richest investors dealing with the challenges and the follow-up from china? we spoke with the president of ubs wealth management. >> we are in for a soft landing. the cycle is still intact. the corrections we have seen in the market were expensive. maybe not the level of pain -- and very large correction.
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we should look through all the noise and have a long-term perspective. china official factory the pmi down from 50 in july. numbers below 50 indicate traction in the manufacturing sector. china's president is planning the biggest overhaul in the country's military and 30 years. -- in 30 years. there would be fewer officers and the number of ground troops would be reduced as well. tensions flaring at greece's northern border where 1500 migrants are waiting to enter macedonia and headed north. people mainly from afghanistan and pakistan tried to rush the border currently being guarded by macedonian police. please respond with stun grenades and batons.
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-- police responded with stun grenades and batons. on oil which rounded off its biggest three-day gain in 25 years. today, back to being down. at session lows right now. that three-day rally put it in a bull market. alix steel joins me with context on that. so much for the bull market. alix: exactly. was this all a technical? saying 25%ad a note was driven by sentiment and not reality. let's take a look at the two factors that drove oil higher yesterday. the news that opec was going to be willing to talk about finding a better price. scarlet: a fair price. alix: talking to non-opec members, let's get together and talk about price.
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all big opec officials are on vacation. there could not have been real high-level discussions on this. when you actually cut see iran is increasing its output? factors that had an lowering u.s.-- production by 87,000 barrels a day. is that a big number? alix: they have 9.4 million barrels a day. goldman sachs raised the question, there needs to be even lower prices. ongoing productivity gains, higher grading, you are getting more for less in the oil community. more damage needs to be done to the oil price in order for these sustain production cuts to be felt.
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scarlet: let's put this all into context here and bring another asset classes. in other asset classes. you can covering fixed income for years. how often have you heard about european bond yields move in oil? lisa: this is a bit of a challenge right now when you put policymakers and bond investors -- you have a direct correlation with the move in oil prices and the moves in the safe haven bonds. u.s. treasuries and the german bund. we don't know the technicals behind each move. ea changes the proclamation, does that immediately affect bond yields? this could complicate the matter for investors looking to bond yields to get clues on are we headed toward inflation or deflation. it is for policymakers looking at this and saying should we anse rates, is this
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indication that people are ratcheting back expectations or is this purely a technical blip? the decline in oil prices is a transitory trend. scarlet: not something they want to take into account when it comes to inflation and what they do next. what about other policymakers? carney.aghi or mark lisa: they have talked about concern in the drop in oil prices. europe is much more directly affected by the slowdown in china. more so than even the u.s. to the extent that the drop in oil prices of late has been related at all to what's going on in china, there is a tangible reason this slows the european
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economy and goes beyond just a technical on guilt correlation issue. -- bond yield correlation issue. alix: the community will see even lower prices going for it. barclays had a note talking about the next glut might be in the product market. a record high right now come 81 million barrels a day in july. refiners work really hard, making a lot of product, margins are awesome, make too much product, margins not awesome, they will not work as hard, the crude.ess scarlet: how are investors positioning themselves when they look at this correlation? lisa: it depends on their worldview. what is your biggest fear? deflation, inflation, you want to hold a lot of cash? people have to stick with that. rather than look to some kind of
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correlation. even a correlation changes over time. alix: you can see it on the chart. just a few months ago, that was a negative correlation. lisa: they are moving in such lockstep. or the oil and bond yields in the getting the reducing expectations for growth. scarlet: what is the leading indicator here? is it the oil or the yields? alix: look at how many shorts are in the oil market and you will know what's going to happen. one headline and you have a powerful rally. lisa: it's hard to tell. there is some disparity right now. the five years are not showing the expectations for such a slowdown in growth as you would think. bond yields have been distorted. there are a lot of technical issues that make it hard for me
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to alix: -- look at credit. scarlet: it speaks to how confusing it is out there that everyone is looking at every kind of indication for correlation and dislocation to get some sense of what's going. there has been a breakout. back at theill be top of the next hour to take us through the market close. coming up, speaking with pimco's exact of vice president about the global selloff inequities -- in equities and the shift into fixed income. ♪
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mark: welcome back to the
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bloomberg market day. stocks under pressure and money moving into treasuries with fields on the two you're coming --n to 71 basis points two-year yields coming down. i'm joined by1, portfolio manager at pimco. -- tony crescenzi, portfolio manager pimco. the safetye towards of treasuries and think that will persist until we get the jobs number that should put things to rest? tony: it does look like we are in for a period of volatility. once the moment of normalization of rates draws closer, doesn't look like we are on the eve of the fed raising rates. they will more likely wait until december. the markets are going through an adjustment process. rates might normalize.
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,here are other things particularly the slow global -- the isnwing today index, airport that has been out -- aver 50 years suggestion the global economy is not faring well. that helps bonds at the expense of stocks. lisa: you think the risk of raising rates is off the table? tony: pimco has field questions about rates rising and investors showing concern about it because -- they cann low only go up. we would suggest the rest of the decade, rates will stay low. this is a reason to jump back into risk assets. in the united states, rates might reach the twos.
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japan, 1%, europe, 1%. as long as there is no recession -- one thing that was negative about the situation, the rate stories, the economy has to be good, tubing. too.s to be good, lisa: what about energy jump bonds? -- junk bonds? pimco has for a number of months found select opportunities were there are good buys to be had in that sector. that will continue to be the case. there's one final note, prices next year probably do rise a little bit. it will be fixing itself slowly, but surely. scarlet: there is an energy component and the never worn
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else. -- everyone else put what is the corporate default rate look like there? what about consumer copies or tech companies? lisa: of the old has been pretty low. -- the yield has been pretty low. think some of those names might selloff? tony: this is probably reflective of the global story on rates and why pimco has been neutral. stayal rates are likely to low for the rest of the decade. investors globally have lots of cash. in europe, there is an account surplus. more money flowing into europe and out. it has to go somewhere. -- into europe than out. up, they takeve advantage.
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they pounce on it. this is what the individual has to try to do. they tend to show more anxiety than institutions. lisa: was the riskiest investment heading into the end of the air? tony: to bet against central banks. investors when they show this nervousness say we don't think they will be able to keep it together. economies will succumb to weakness. that is bad for bonds and stocks that depend on cash flow. don't bet against central banks. scarlet: which central banks? been a lot of skepticism towards the people's bank of china. they will learn the things they need to do to stabilize markets.
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it wants to have it happen over time. doesn't want it to happen too quickly. it has already been writing that ship. china?re you buying in tony: it is more difficult to buy for any investor in china. the currency may weaken a bit more than markets are priced, but not materially. markets have it about right in terms of how much the evaluation will occur -- d valuation will occur. wherewithal to apply to help stabilize its economy. scarlet: what is your faith that we are decoupled from what's happening in china? tony: the united states is in terms of its -- because of its,
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the u.s. depends on the service sector. we don't depend as much on china. scarlet: the financial markets are connected. tony: that is the primary channel. why financial conditions matter to the fed. andill affect the fed interest rates in the stockmarket. lisa: fed officials don't seem to think it's that big a deal if they have to drop interest rates down 20 basis points. tony: there is asymmetric risk at the zero bound. that's why they are hesitating to move. full employment is about to be reached. report -- jobs
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report is expected to fall to 5.2%. it has not moved yet. no central bank has been able to do this yet, take up zero. it has no ammunition to move afterwards. another reason to think it would want to get up zero, to build a cushion against the next downturn. the initial move, they have to be careful about because there is not much ammunition to help asked the problem. -- help fix the problem. lisa: in might be a bigger risk than they are implying. tony: risk management has been to-- if it moves from 0% .25%, what does it do to fix the mistake? is not the antidote. they would rather wait. have a cushion to say it was not
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the right idea to raise rates. tony crescenzi, thank you so much for dropping by. and our very own lisa abramowicz. coming up, more than 70% of ipos in the past year have been money-losing firms. we will give you all the context, next. ♪
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scarlet: u.s. stocks in selloff mode on his first trading day of september as we approach the final hour of trading. matt miller has a look at where things stand. matt: not at the very bottom of the session lows. we are still pretty close. 405 is the loss for the dow jones. at the worst point today, we were down 451 points. definitely a bad first day of september. 2.5% the loss on the s&p. the nasdaq down 2.4%.
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the nasdaq negative for the year. the s&p and doubt both in full correction mode. -- the s&p and doubt. -- s&p and dow. adam parker at morgan stanley took it down to 2220. graphed s&p forecasts for the year going back historically. they take a little turned down here with adam's move. a big turn down with what we're looking at today. it's not often that stocks have so far to catch up. this goes back to 2009. it is fairly rare that strategists are so far ahead of where the s&p is actually trading.
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take a look at energy and financials from 10 industry groups on the s&p 500 are down. these two are the biggest losers, each down 3%. commodity isg getting hit as far as the energy index is concerned. let me go ahead and take oil. oil is off 8% right now. it continues to get lower and lower throughout the day. the worst it has been -- the biggest loss we have seen intraday since the report. this february 4. down 7.8%. week, we were looking at a 38 handle on oil. a little bit better than it had been. scarlet: thank you so much. all these swings means the ipo market is feeling it. 2014,the beginning of
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more than 70% of initial public offerings have been for money-losing companies. dothighest ratio since the com couple burst. liquid holdings at less than $.10. what is the lesson here for investors when it comes to liquid holdings? >> it pays to do your homework. there were a lot of red flags. the people who bought it did not ask a lot of questions. including things like related party transactions, lack of revenue, a big loss on r&d. scarlet: we heard about the lack of profitability for a lot of tech companies and startups. lack of revenue should've been a huge red flag. how did manage to go public? neal: a lot of things have been coming together. the jobs act has made it easier for small compass to go public. they don't have to subscribe to
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the same financial auditing standards. wall street is. anxious to take these companies public and the investors have not been asking a lot of questions. scarlet: this momentum trade has paid off very well. until it doesn't. everything works until it doesn't. what is liquid holdings tell us about the rest of the ipo market? neil: it is time to be cautious about the dogs that are out there. we are seeing more money-losing dot comd ipos since the bubble. scarlet: what would you be worry up -- wary of? neil: the companies with related party transactions, those that are roll up's that have no real history of cooperating. ata lot of cases, you look what these companies -- do they
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really have experience in this case? scarlet: you have to do due diligence. >> do your homework. scarlet: thank you for joining us. you can read his story on the ipos that have not been doing too well since the frothy piece of the tech boom. we keep an eye on the markets off by 2.5%,&p 500 the dow industrials losing 2.4% and the nasdaq down by 111% points. ♪
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scarlet: it is new in san francisco, 3 p.m. in new york, 3:00 a.m. in hong kong. lisa: this is the bloomberg market day. ♪
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scarlet: good afternoon. i'm scarlet fu here with alix steel. alix: we have to get straight to the markets. the dow is down over 400 points. scarlet, you are looking at stocks headed for their worst quarter since the fourth quarter in 2011. all s&p sectors are lower and likestocks -- something four s&p stocks are not in the red right now. scarlet: this is another way of illustrating what the moving has been like today. 218ad our low at about p.m., so about 40 minutes ago. we have come off of the worst levels of the session, but really a down day. today on an id


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